Governments failing first home buyers

THE great Australian dream for aspiring first home buyers is increasingly just that - a dream.

Chris Pippos

Unfortunately, too many young people still find themselves on the renting treadmill or on the public housing waiting list.

Many of them are working full- time and would have been homeowners had they been born generations before.

They are denied the pride and security that comes with owning their own home.

Governments over past decades must accept much of the responsibility for this failure.

Respected economist Saul Eslake nailed the issue in his submission, entitled Australian Housing Policy - 50 Years of Failure, to the current federal parliamentary committee inquiry into affordable housing.

Essentially, Mr Eslake said the two principal government interventions in the housing market - cash help for first home buyers and negative gearing - had failed to achieve their stated objectives, inflated the demand for housing, not increased the supply of housing, and made housing affordability worse.

These policies had "exacerbated the difficulties" facing first home buyers.

And Mr Eslake said it was largely politics getting in the way of sound housing policy designed to boost housing supply for first home buyers.

And he's right. It all gets down to votes.

To quote Mr Eslake:

"It is perhaps worth wondering why successive governments of various political persuasions have been so unwilling to alter policies which have not merely failed so abjectly to meet their stated objectives, but have demonstrably had such an adverse impact on those whom successive governments repeatedly assert they are keen to assist.

"At the risk of appearing cynical - not that, in my experience, being cynical about the motivations of political parties and governments carries a serious risk of leading one into making erroneous predictions about what they might be - I think the answer is obvious.

"While political parties and governments profess to care about first home buyers, the reality is that in a typical year fewer than 100,000 people succeed in attaining home ownership for the first time; whereas there are some 5.8 million households (and over eight million people) who already own at least one property.

"Hence there are 100,000 votes for policies which might result in lower house prices, and over eight million votes against policies which might result in lower house prices.

"As the Americans say: 'do the math'."

Mr Eslake went on to say former prime minister John Howard often said no one complained about the increase in the value of their home, or wanted policies that would reduce the value of their home so that younger people could buy them more readily.

The solution to the housing affordability crisis was axing house price-inflating policies while implementing programs and financial incentives to boost private housing supply, as well as measures to allow people to become home owners on a shared equity basis, Mr Eslake noted.

Some people blame greedy baby boomers for denying young people an opportunity in the housing market, but it has been successive governments who have failed on a policy level.